Indian stocks rally on Congress election win
Tuesday 19 May 2009
Indian stocks surged by more than 17 per cent yesterday, forcing the market to close after the country's ruling coalition, led by the Congress Party, won a decisive electoral mandate.
Trading at the National and Bombay stock exchanges was suspended twice as frenzied buying triggered circuit-breakers designed to limit wild swings. The first suspension came in the morning, with leading stocks vaulting almost 11 per cent as markets opened.
A two-hour break was followed by another burst of enthusiasm, halting business for the rest of the day. Although curtailed, the session saw the biggest single-day gain for the Bombay Stock Exchange's benchmark Sensex 30 index, which ended up 17.3 per cent at 14,284, an eight-month high. The bulls also dominated the National Stock Exchange's Nifty index of top 50 stocks, which closed up nearly 18 per cent.
In the currency markets, the Indian rupee climbed by 3.1 per cent against the dollar, its strongest showing in more than two decades. The benchmark bond yield touched a two-week low as traders re-priced risk.
The rally followed the Congress-led coalition's overwhelming victory in the national polls. The voters defied the pundits, backing Prime Minister Manmohan Singh's government in droves, and paving the way for more aggressive economic reforms. The Congress-led alliance won 262 seats with the opposition BJP-led group on 158 seats.
With a strong mandate in his pocket, Mr Singh, whose efforts at reform were hamstrung by the left-wing lawmakers who kept him in office during his first five-year term, no longer needs to bow to the demands of the communist flank in parliament.
Tushar Poddar, an analyst at Goldman Sachs, described the results as "almost a best-case scenario for the markets". "We think pension, insurance, banking reforms and disinvetment may be back on the agenda," he said, adding that the results "may help India 'decouple' further from the global economy by giving a fillip to domestic demand".
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